The fund or the category works for those investors who are unclear about the asset allocation they should maintain and would want to leave it to a fund manager to take that decision for them
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Franklin Templeton Mutual Fund (Franklin MF) has recently announced the launch of Franklin India Balanced Advantage Fund (FIBAF). The new fund offer (NFO) will open for subscription on August 16 and close on August 30.
This is Franklin’s first new scheme since a regulatory crisis following its decision to wind up six of its debt schemes in April 2020.
Here are key things to know:
About the fund
Franklin Templeton’s NFO is a balanced advantage fund.
According to the fund house, the new fund is for investors looking for a balanced exposure to equity and debt over the long term while also capitalising on opportunities provided by the market from time to time.
What exactly is a balanced advantage fund (BAF)?
Balanced advantaged fund or BAF is a hybrid fund that has a mix of equity and debt assets. Also known as dynamic asset allocation funds (DAAFs), these funds dynamically balance the asset allocation depending on the market conditions.
How does BAF work?
These funds invest in a mix of stocks and securities, and at times may even have an arbitrage component. They keep changing this allocation based on the market conditions.
This varies from fund house to fund house, but the point is that there is a dynamic allocation of equity and debt based on the markets — how expensive or how cheap the markets are.
BAF cuts exposure to equity and increases investments in debt products when the market is overvalued and cuts debt exposure and increases investments in equity when markets are undervalued. So, this helps in taking advantage of lower valuations and generates considerable returns
Who should invest in the said NFO?
According to Shweta Rajani, Head, Mutual Funds, Anand Rathi Wealth Limited, investors who are unclear about the asset allocation can take a shot here.
"The new fund offer is a balanced advantage fund where the fund manager would invest in equity and debt asset class and actively manage allocations between them. The allocation to equity would be decided based on certain valuation measures like P/E and P/B. At times the fund may also take exposure to index futures to balance risk. The fund or the category works for those investors who are unclear about the asset allocation they should maintain and would want to leave it to a fund manager to take that decision for them,” Rajani said.
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